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The Weekly Charts

It was an interesting week for stocks, as the market started off on a negative note, but the indexes managed to recoup at least some of the losses later in the week. The Dow Jones Industrial Average SPDR (ARCA:DIA) was the only ETF that managed to eclipse the Monday (June 11) high during intra-week trading though. Therefore, the short-term trend remains down at this time, but if the other indexes can follow through and push above their June 11 highs, it could spark another short-term wave higher. If the rally occurs, where it is likely to tucker out varies by index. If the rally does not occur, there are important support levels close by, which if breached, signal a more aggressive drop in the market.

S&P 500 SPDRS (ARCA:SPY) managed to briefly move above resistance is at $134 on June 11, but couldn’t hold it. This has created a resistance area between $134 and $134.25. A break above that region, especially if the market can close above it, indicates a further rally is likely to ensue. The next resistance levels are at $136 and $140. A drop below $131, on the other hand, is bearish and likely to result in a test of the recent low at $127.14. If that low is breached, the next downside target is at $126, followed by $122 (if we move below $126). Volume has been increasing since May and the strong buying days this week did not match the volume seen on high volume selling days over the last month. This confirms the downtrend, but as indicated, short-term rallies still could occur if resistance is breached.

The Dow Jones Industrial Average SPDR broke above $126 this week indicating a short-term rally may be underway. Additional resistance is at $128 and $131.50 and the former could be a hard region to get through. From the start of February to the middle of May, the ETF found support between $127 and $128 (unadjusted). Upon significantly breaching this level, that region now becomes resistance. One other point of interest is $130. If a rally manages to surpass $128, the target is $130 and the rally is likely to tucker there (or before). A drop back below $123.50 has bearish implications, and provides further downside targets of $120, followed by $116 if the former is breached.

PowerShares QQQ ETF (Nasdaq:QQQ), representing the Nasdaq 100 index, met with resistance once again just above $63 this week. Stuck in a choppy sideways range, the ETF will need to push through $63.50 to potentially ignite some short-term buying interest. The next resistance levels are $64.50 and $66. A drop below $61.50 on the other hand is likely to trigger selling into support. Support is at $60 followed by $59. The $59 mark is important because it was a resistance area back in October and November, and should now support declines. If it does not, it is a longer-term bearish signal. The next target would be at $56, should $59 be breached in the coming week(s).

Not much changed this week in the Russell 2000 iShares Index (ARCA:IWM) ETF, representing the Russell 2000 index. The ETF remains below the pivotal $78 level, a strong former support level that has now become resistance. Based on the lagging performance of this ETF in 2012, a major breakout higher is unlikely, but if it occurs, additional resistance is at $80 and $81. A drop back below $74.60 indicates more selling is likely and would be confirmed by a move below the June 4 low at $72.94. If this occurs, the next downside target is $71, followed shortly by $70, which are right in the vicinity of the long-term upward trendline going back to 2009.

Bottom Line

While this week had some volatile moves, not a lot changed. The major indexes remain in downtrends, although it is possible the Dow Jones Industrial SPDR may have broken out and be in the midst of a short-term rally. The other ETFs have not confirmed this yet. If the other ETFs can break through their respective resistance levels a short-term rally is likely to ensue. If that rally occurs, it is likely to tucker out before creating new 52-week highs though. With risk still to the downside, if the support levels are breached–which are not far away either – expect to see additional selling and another wave down in the downtrend.